China's Alibaba Group Holding Ltd established its first overseas e-commerce hub in Malaysia yesterday, which will see the e-commerce giant investing into both the infrastructure and real estate projects.

Jack Ma, founder and executive chairman of Alibaba Group, had first proposed the establishment of such a hub under the Electronic World Trade Platform (eWTP) for small businesses in June last year during the St Petersburg International Economic Forum in Russia.

“I laid out the vision for eWTP last year, and we as a company have taken on the responsibility to make this a reality. The first e-hub under the eWTP outside of China will go a long way towards making global trade more inclusive and provide much needed support to a hugely important constituent, that is, the small and medium enterprises (SMEs) and the younger generation,” said Ma in his opening speech at the launch of the Digital Free Trade Zone (DFTZ).

The goal of the eWTP initiative is to build a more inclusive, free and innovative global trading platform for SMEs, young people and consumers.

Alibaba’s facility will be part of the DFTZ, and is expected to be launched at the end of 2019.

“It will function as a centralised customs clearance, warehousing and fulfilment facility for Malaysia and the region to deliver faster clearance for imports and exports,” said Alibaba in a statement, although the e-commerce company declines to disclose the size of its investment in the hub.

Meanwhile, the DTFZ will provide physical and virtual zones to facilitate SMEs to capitalise on the convergence of exponential growth of the Internet economy and cross-border e-commerce activities and its implementation will be done in phases.

The first e-fulfillment hub will be centred at KLIA Aeropolis in Sepang.

According to Prime Minister Datuk Seri Najib Razak, the DTFZ has the potential to double the growth rate of Malaysian SMEs' goods export and create 60,000 direct and indirect jobs by 2025.

“Malaysians have embraced the Internet economy and e-commerce in a big way. We are now leading the e-commerce market in the region, generating revenue of US$2.3 billion in 2015. With the launch of the world’s first DFTZ, Malaysia will serve as a regional e-fulfillment centre and also become the regional hub for SMEs, marketplaces and monobrands,” Najib said in his keynote address at the launch of the trade zone yesterday.

Alibaba Group will work together with Malaysia Digital Economic Corp (MDEC) in the development of the hub, which will see the introduction of Alibaba One Touch platform that will link Malaysia directly to Hangzhou’s cross-border e-commerce pilot zone to enable SMEs and businesses to trade conveniently and efficiently between the two countries.

Alibaba affiliate Ant Financial Services Group also signed a memorandum of understanding (MoU) with Malaysia's top lenders Malayan Banking Bhd and CIMB Group Holdings Bhd to explore collaboration opportunities in e-payment and financing services.

The banks will allow Chinese tourists to use Alipay e-wallet services in Malaysia. Launched in 2004, Alipay currently has over 450 million active users.

Maybank said its strategic partnership with Ant Financial, which operates the world’s largest online and mobile payment platform Alipay, is to provide Alipay users travelling in Malaysia with contactless payment services which can be used in various outlets ranging from high-end department stores, duty free outlets to hotels popular with Chinese visitors.

Meanwhile CIMB Group said in a statement that it would act as the settlement and merchant acquirer bank, allowing Chinese visitors to pay for their transactions in yuan without concern about exchange rates. This is done through a simple barcode-scanning method that they are used to in their country.

CIMB Group chief executive Tengku Datuk Seri Zafrul Aziz said the entry of Alipay marked a notable milestone in the growth of mobile wallet payment services in Malaysia.

MDEC chief executive officer Datuk Yasmin Mahmood also shared that the first e-fulfillment hub will be centred at KLIA Aeropolis in Sepang. The initial phase will be rolled out before the end of 2017 by Alibaba, Cainiao Network, Lazada and Pos Malaysia, leading to the formal launch of Alibaba's facility at the end of 2019, which has committed to take up 20 acres (approx. 8ha) in KLIA Aeropolis — a 27,700-acre planned integrated airport city development led by Malaysia Airports Holdings Bhd (MAHB).

MAHB inked a MoU with Cainiao Network, the logistics arm of e-commerce giant Alibaba Group to develop a regional e-commerce and logistics hub in the KLIA Aeropolis as part of the DFTZ.

Yasmin noted that some of the potential benefits with the DFTZ include the access to the China market that is expected to import US$10 trillion (RM44.2 trillion) over the next 10 years.

“With our strength in certain markets such as halal products and electronic goods, we will be able to tap into a larger market. Besides that, being a trans-shipment hub will also strongly benefit Malaysia. This is why we have estimated the US$65 billion incremental trades through the DFTZ, as well as the creation of 60,000 jobs,” she said.

The DFTZ will also see a satellite services hub, also known as the Kuala Lumpur Internet City (KLIC), to be developed in Bandar Malaysia. It will be developed by another strategic partner, Catcha Group, which will become the project master developer.

Catcha aims to house at least 1,000 Internet-related companies on a 5 million sq ft area built over 15 years with an estimated gross development value (GDV) of RM5 billion. It is intended to be one of the world’s largest purpose-built digital hub for global technology giants from China, the US and other major countries which are targeting South-East Asia as well as regional tech companies and local start-ups.